Last Updated: Sunday, May 21, 2017

Suzlon Energy a Multibagger in making | 2017



Suzlon Energy a Multibagger in making, 2017_price_target_turnaround_stories_stock price_share marekt, nse bse broker's view
"No Shares are good but the price you enter makes it good" 
NSE: SUZLON - 3 Apr, 2017                Closing Price 19.25

 About Suzlon Energy Limited 
Suzlon Energy is the pioneer and leader in renewable energy solutions business. Suzlon is the market leader in India with global presence in Asia, Australia, Europe, Africa, North and South America. Over the past two decades, Suzlon has expanded and strengthened its presence in 19 countries. The group has 15 manufacturing plants in India and China as joint venture. With dynamic employs more than 8,000 employees, Suzlon is proud to promote a culture that respects and empowers the community as the most valuable assets of the company. Suzlon Energy is the market leader in India with more than 100 wind turbines with an installed capacity of over 10 GW distributed in 9 countries. Suzlon is credited with the development of a number of Asia's largest operational offshore wind farms in Gujarat, Rajasthan, Maharashtra and Tamil Nadu. These Kutch (Gujarat) and Jaisalmer (Rajasthan) from Suzlon wind farm to date have a cumulative installation of about 1,200 MW each. Suzlon diverse customer portfolio includes companies from a wide range of industries, including private and public companies, energy suppliers and independent power producers. To Know more about Suzlon Energy Limited and its product portfolio you may visit its official site here>>>

 Key numbers; (Standalone) 




  • MARKET CAP (RS CR): 9,596.60 
  • P/E: 44.42
  • BOOK VALUE (RS) : 1.23
  • DIV (%) : 0.00%
  • INDUSTRY P/E: 28.72
  • EPS (TTM) : 0.43
  • P/C : 25.13
  • PRICE/BOOK : 15.53
  • FACE VALUE (RS) : 2.00
*Source: moneycontrol as on 29-03-2017


Inception of a turnaround story.....Is the worst over now?

  Suzlon in the past...  

Suzlon Energy witnessed a robust growth in the past when it was the most loved shares in Indian stock market. It made all time high of Rs. 440 (adjusted price) on 09 Jan'12. Suzlon is great company, which went from the steady growth path to huge losses after the acquisition of the German company Senvion in the year 2007. Before 2016, Suzlon energy reported its last profit in 2008 -09 and has since then steadily declined. The debt kept itself at an alarming pace and when it hit more than Rs. 17,000 Cr. they had no other, but shelf from the German subsidiary, and it has finally happened last year (2015).


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"Present post is for education purpose only and should not be taken as stock recommendation. The price targets mentioned in this post are given by respective brokerage houses, read disclaimer at the footnote of this blog page before making any position in the stock."
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 The Buzz... 


After being in long term bearish phase Suzlon Energy is once again showing strength on chart, market experts and brokerage houses are now positive to this scrip. At the time of writing this post shares of suzlon were trading above 19 on NSE & BSE. Though it has been the most frustrating stock for the investors in last decade yet it has become almost double from its all time low. It's all because of the debt management by the company, the company is continuously focusing on debt reduction. Punters of the stock market are again considering it to be a 'multibagger stock', market whispers make Suzlon a turnaround story in upcoming years. Some of them say it would be a multibagger stock in 2020 while some are still worrying to lose their capital. Let's see what's going on in Suzlon....👀

 The Turnaround... 


After posting continuous losses since 2008, Suzlon eventually become profitable with a profit of Rs. 483 Cr in FY 2016.

FY16 result highlights;
  • FY16 revenue up by 69% to Rs. 8,259 Crores.
  • Robust normalised EBITDA margin over 15%.
  • Annual sales volume of 1,131 MW; Y-o-Y growth of 149%.
  • Increase in domestic market share from 19% in FY15 to 26% in FY16.
  • FY16 order intake of 1,251 MW is 3 times higher than in FY15.
In the word of Mr Tulsi R Tanti, Chairman and Managing Director, Suzlon;
"We are back in profit, our startup MW increased by more than 100%, and we are confident to maintain growth focus on implementation. The Indian market is expected to increase by 30% in 2016-17 and Suzlon continue to exceed industry. Worldwide demand for renewable energy increases with the installation of 64 GW and a record investment 329 billion US dollars during the calendar year 2015. The demand for clean energy, sustainable and affordable continue, particularly in emerging markets."

 Debt management 
Suzlon Energy has already started reducing on its debt by selling it's non-core assets.  As per Tulsi Tanti the chairman and managing director Suzlon is likely to exit the debt restructuring program within one year after the recent infusion of capital and the recovery of unconventional energy demand in the third largest Asian economy.
Earlier Suzlon had a total debt around Rs 17,000 crore then it raised about Rs 7,200 crore through sale of it's German subsidiary Senvion in late 2015. The management used about Rs 6,000 crore to repay it's loans and pushed Rs 1,200 crore to fund it's operations. They further issued foreign currency convertible bonds valued at Rs 3,000 crore which they believe will be converted into equity next year. While remaining debt of Rs 7,500 crore includes low interest dollar denominated worth Rs 4,000 crore and Rs 3,500 crore worth working capital loans. The management further assured that there will be no principal payments till 2019 and by the next financial year, its interest costs will reduce 50 per cent to Rs 800 crore from Rs 1,600 crore now. (Business Standard, 2016).

    Suzlon is ready to list its maintenance arm to reduce debt    


'Suzlon Global Services'  is the subsidiary company of Suzlon Energy Limited which is considered to be its maintenance arm, the company is willing to issue public offers (IPO) in days to come. As per the report published on moneycontrol on 17th feb, 2016 Suzlon Energy Ltd is exploring the possibility of listing its subsidiary company 'Suzlon Global Services' to offset the debt of its parents. Suzlon Global Services is wholly-owned by Suzlon, which in turn is 100% owned by Suzlon Energy. "The IPO will make Suzlon Global debt free," said the official, adding that the company could seek to increase Rs 2,000 crore through this IPO.

Sun pharma’s promoter invested heavily in Suzlon

Suzlon_multibagger_stock_to_buy_now_India_2017_turnaround_Sun Pharma stake in suzlon

Dilip Shanghvi the promoter of Sun Pharma and his family acquired upto 34% stake in recent years.  There is a hue & cry in Dalal Street because 4 years before when Sanghvi bought the shares of Natco Pharma then it was a less known company and a sudden upside was seen the price of shares of Natco pharma. 
Also read: Suprajit Engineering: Quality Stock for long term Investors

  Why Suzlon Energy is a turnaround story or a multibagger in making?  

In recent quarters suzlon has continuously been posting some good numbers. See both topline and bottomline are inching up;

Rs. in Cr.Dec 2016Sep 2016Jun 2016Mar 2016Dec 2015
Net Sales Turnover3,311.382,752.121,655.093,272.551,884.64
Other Income25.4417.3413.8518.3413.45
Total Income3,336.822,769.461,668.943,290.891,898.09
Total Expenses2,595.062,133.281,532.293,093.661,627.88
EBITDA741.76636.18136.65197.23270.21
Depreciation109.4294.7683.61118.0297.56
EBIT632.34541.4253.0479.21172.65
Interest339.10298.14304.10318.88285.81
PBT293.24243.28-251.06-239.67-113.16
Tax1.070.983.963.430.23
PAT292.17242.30-255.02-243.10-113.39
Minority Interest1.570.57-0.03-10.054.94
Net Profit274.34237.62-259.97-231.61-121.84

What market experts say on Suzlon's price target...


KR Choksey is bullish on Suzlon Energy has recommended buy rating on the stock with a target price of Rs 31.
Find KR Choksey's report on Suzlon Energy


Mehraboon Irani of Nirmal Bang Securities See Suzlon Energy as a potential multibagger and told CNBC-TV18,

 Suzlon Energy's shares, which we wished only from the perspective of people who want to punt with stocks like JP Industries, Punj Lloyd, Suzlon, IFCI, UNITECH. If you want to pick one particular goods of all this trash would be Suzlon because somewhere along the line, despite the fact that the balance sheet was in very bad condition, was expressed serious attempts are likely to work on it. It belongs to the segment that ultimately would come into focus in particular within the new government and is now the answer is very clear, with Sun Pharma taking an interest directly or indirectly in this company. At Rs 18-20 equity participation possibly could to be multibagger. I do not ask investors, especially those who believe in pure fundamentals go and buy into it. However, 5 percent of the money, I always believe should ride in this type of inventory where you can possibly provide much better returns than the overall market can give you. Suzlon Energy to me qualifies as a bet in the segment, read more>>>
HDFC Securities' research report on Suzlon Energy HDFC reiterates BUY on Suzlon with a Target Price of Rs 24/share (10x Dec-18E EV/EBITDA).


In the word of HDFC Securities;
The results of Suzlon Energy (SUEL) 3QFY17 were a hit in all counts with a volume of 462 MW (+ 80% YoY) and EBITDA margins of 22.5% (+ 490bps YoY) - resulting in a disproportionate APAT of Rs 3.0 Bn. The improvement in EBITDA margins was driven by the operating leverage advantage and a positive sales mix (lower EPC). In addition, SUEL is actively pursuing value creation in subsidiaries (SE Forge and Services Business) for a substantial reduction in debt. As a result, we are reiterating BUY on Suzlon energy with a Target Price of Rs 24 / share (10x Dec-18E EV / EBITDA). Read more; HDFC research report on Suzlon pdf
In the words of HSBC;
"Suzlon Energy has cut its net debt by nearly 50 per cent from its peak and recovered margins during FY16. The global financial services company expects Suzlon to turn profitable during 2016-17 as well as regain market leadership. We forecast Suzlon Energy to register a healthy 28 per cent Ebitda CAGR over FY16-19. Our target price of Rs 25 implies an FY18 EV/EBITDA of 11.9 times, while it is currently trading at 9.3 (adjusted for dilution).”

  Multiple triggers for a multibagger in making  


 Internal Triggers: 
  • The Worst is now over last year was the turnaround year for Suzlon energy. The company managed net profit of 483 crores in Fy 2016-17. 
  • The company recorded 1130 MW sales volume which let a 149% increase over the previous year.
  • Market Experts say it has bottomed out and now they are giving aggressive target in Suzlon brokerage house Nomura, HSBC and HDFC Securities have rated wind turbine firm Suzlon Energy as a ‘buy'. While some clearly identified it as a potential multibagger stock in India.
  • Debt Management : The company is nicely managing its debt, they have reduced it significantly by selling it's subsidiary in Germany, issuing NCDs and further has a plan to offer public issue of its maintenance arm Suzlon Global. Market Experts and brokerage houses are expecting a multibagger return in suzlon once it becomes a debt free company.
  • Sun pharma’s promoter Dilip Sanghvi has huge investment in Suzlon
  • 2015-16 has been a turnaround for the company where it managed a net profit of 483 crores.The company has turned into a profit making company in recent quarters too and  posted back-to-back two successful quarters with robust topline, nice bottomline and handsome profit margins which further manifests the turnaround story in the company. In last two consecutive quarters, gross margins are also in the range of 44 - 46%  which might help the Suzlon to be a multibagger stock, if sustains.
  • Consolidated net debt of the company has brought down from 16,500 crores to 7,500 crores and it still working on debt management.
  • The order book of the company is growing nicely. The inflow of new orders reflects the increased interests and investments of independent producers in the wind sector and the company is convinced that demand for PPIs will continue to grow. (Suzlon Group CEO J P Chalasani  said to ET)
  • The company has now reached to a milestone of 10,000 MW production in India. Two new rotor blade factory was put into operation in Andhra Pradesh and Rajasthan.

  •  Suzlon is a leader in the wind energy space and it has recently entered into the solar space. The company is expecting solar energy to compliment wind energy so The company is now well positioned as a supplier of multidimensional solutions. We can expect Suzlon to offer wind-solar hybrid solutions in near future.
  • The company has recently strengthened its top level management by appointing two prominent personalities namely JP Chalasani as CEO and Rakesh Sarin as CEO of international operations. 


 External Triggers; 
  • Government of India has an ambitious target of 5000 MW per year for wind energy in upcoming years. Suzlon is having 14 manufacturing facilities in India and it has it's active presence in all nine windy states which makes it well placed to take full advantages of this opportunity.
  • Credit rating agency CARE revised suzlon's rating from BBB- to BBB for all it's domestic operations, and A- for it's international operations. We can hope further improvement of its rating once the company become debt-free.
  •  Dilip Shanghvi the promoter of Sun Pharma and his family has good stake (around 34%) in suzlon. This leads a positive sentiment in market and will boost the confidence among retail investors in India. Hence Sun Pharma taking an interest directly or indirectly in this company.
  • Entire world is shifting towards renewable energy which is good signal for business prospect of Suzlon.
 Summing it up....


Now that Suzlon Energy has transformed into a profitable company, renewable energy sources take time to grow, and debt reduction will bring more benefits to its shareholders. Market experts are positive towards Suzlon and are approaching aggressive price targets. Some brokerage houses believe that Suzlon is a turnaround story. While there are many triggers in Suzlon that could make it a multibagger stock in the near future, the board must prove effective in restructuring the remaining debt and gaining the trust of its stakeholders. 

[Update]: May 21, 2017;
Suzlon Q4 result, 2017 out

Continue to demonstrate strong operational performance on every front, including volume growth, commissioning and order intake


Suzlon Energy reported on Friday a consolidated profit of Rs 578.99 crore in the fourth quarter, which ended March 31, mainly due to a timely order processing. The wind turbine company recorded a net loss of Rs 333.87 crore in the corresponding quarter of the previous financial year.  Income from operations during the January-March period increased by 55.08% to Rs 4992.59 crore of Rs 3219.30 crore a year ago.

The numbers are far ahead of expectation as analysts polled by Bloomberg anticipated a net profit of Rs278.8 crore on revenue of Rs. 4,814 crore. So on profit parameters, there was a profit more than double of market expectations.

Looking at the year's figures, we see that sales have jumped by 35% to reach Rs.12692.5 crore, while EBITDA rose by 99% to 2869.7 crore.
The best part is that management is committed to maintain this numbers in the word of Group CEO J P Chalasani;
"We continue to demonstrate strong operational performance on every front, including volume growth, commissioning and order intake,"
"Despite achieving growth in volumes and profitability, we have managed to reduce our net working capital, optimised the debt profile and continue to maintain strong liquidity position for future ramp up," Group CFO Kirti Vagadia said. 
As the result was out after market our on Friday, we may see some positive reaction on stock price on Suzlon Energy on Monday.
Shares of Suzlon Energy closed at Rs. 20.55 up by 55 paise or 2.75% from its previous closure of Rs. 20 on the BSE.
The stock opened at Rs. 20.4 and touched a high and low of Rs. 21.35 and Rs. 20.35 respectively. A total of 150518574 shares were traded at both the stock exchanges.

Over to you

Now let’s make this post more interesting; do you believe that Suzlon is really a turnaround story and a multibagger in making? Do you have any point in your mind we left to discuss in current post? If yes, please tell us why by using the comment box below.

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Labels: Great turnaround stories, Suzlon stock market price target today, turnaround companies 2017 in India, positive turnaround Indian stocks, Suzlon multibagger stocks in India 2017, Suzlon price target in 2020, Suzlon multibagger, Experts opinion on suzlon, brokerage houses on suzlon. Share price target suzlon vs inox wind, NSE, BSE. Money n business blog, technical price target in suzlon.



DISCLAIMER I am not an Investment advisor and do not provide this service via this Blog. The stocks discussed on the blog and each post are for educational and discussion purposes only and are not recommendations to buy or sell stocks. I may or may not have a position in the stocks discussed on this blog. For any investment decision, please contact a certified investment advisor.

6 comments:

  1. Nice blog sir. And great compilation of all relevant information at one platform. But i coundnot find any price target by you. However its good atleast there is no biased view or false target. I think its really a multibagger stock to buy now in india. Pls add me in your whatsapp group sir pls. My mobile number is 92_346_22_012

    ReplyDelete
    Replies
    1. Thanks Anjikya,
      you may subscribe to this blog to be first to get latest update for free. for whatsapp group etc. pls visit our facebook site https://www.facebook.com/moneynbusiness/

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  2. As per market experts Suzlon Assumptions in FY19:
    Will do about 2000MW that is approximately 14000Cr of Topline, with 20% margin gives it 2800cr of EBITDA, add 500Cr from Maintenance business and 100Cr from Foundry, Total EBITDA OF 3400cr, giving it 10x gives 34000 less 6500 debt gives 27500 divide it by 600cr shares (adjusted for FCCB) gives a target of Rs. 45/-
    FWD

    ReplyDelete
  3. Indiabulls Real gone mad because of announcement of restructuring.....

    Anant Raj also announced Demerger and restructuring some time back....

    *Celebrated Investors like Rakesh Jhunjhunwala, Porinju, Rakesh Damani are invested in this company, this brings more confidence of investing in this company for long term.......a potential multibagger*

    ReplyDelete
  4. Thanks for sharing informative post. Keep Posting.

    ReplyDelete
  5. This is amazing information. I think its really a multibagger stock to buy now in india. Pls add me in your whatsapp group sir pls. My mobile number is 9650020888..Please

    ReplyDelete